Correlation Between Office Properties and SL Green

Can any of the company-specific risk be diversified away by investing in both Office Properties and SL Green at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Office Properties and SL Green into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Office Properties Income and SL Green Realty, you can compare the effects of market volatilities on Office Properties and SL Green and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Office Properties with a short position of SL Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Office Properties and SL Green.

Diversification Opportunities for Office Properties and SL Green

-0.36

Correlation Coefficient

Office Properties  SL Green

Very good diversification

The 3 months correlation between Office and SLG is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and SL Green Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SL Green Realty and Office Properties is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Office Properties Income are associated (or correlated) with SL Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SL Green Realty has no effect on the direction of Office Properties i.e., Office Properties and SL Green go up and down completely randomly.

Pair Corralation between Office Properties and SL Green

Assuming the 90 days horizon Office Properties Income is expected to under-perform the SL Green. In addition to that, Office Properties is 1.59 times more volatile than SL Green Realty. It trades about -0.05 of its total potential returns per unit of risk. SL Green Realty is currently generating about 0.0 per unit of volatility. If you would invest  6,670  in SL Green Realty on October 10, 2024 and sell it today you would lose (104.00) from holding SL Green Realty or give up 1.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Office Properties Income  vs.  SL Green Realty

Office Properties Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

SL Green Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SL Green Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, SL Green is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Office Properties and SL Green

The main advantage of trading using opposite Office Properties and SL Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Office Properties position performs unexpectedly, SL Green can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SL Green will offset losses from the drop in SL Green's long position.

The idea behind Office Properties Income and SL Green Realty pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.